1
CHAPTER 1
INTRODUCTION
1.1
Introduction
A contractor is under strict duty to complete on time except to the extent that
he is prevented from doing so by the employer or is given relief by the express
provision of the contract. The effect of extending time is to maintain the contractor’s
obligation to complete within a defined time and failure by the contractor to do so
leaves him liable to damages, either liquidated damages or general, according to the
term of the contract.
In the absence of the extension provisions, time is put at large by prevention
and contractor’s obligation is to complete within a reasonable time. The contractor’s
liability can then only be for general damages but first must be proved that he has
failed to complete within a reasonable time. 1
1
Brian Eggleston , “Liquidated Damages and Extension Of Time In Construction Contract”, Second
Edition, (Blackwell Science,1992), pp.162
2
According Lim Chong Fong,2 the operation of clause 43 modifies the liability
of the Contractor to complete the Works by the Date for Completion specified in the
Appendix and to pay Liquidated and Ascertained Damages to the Government upon
the
failure of the Contractor to meet the deadline. It imposes a duty on the
Superintending Officer to grant a fair and reasonable extension of time for the
completion of Works in certain specified circumstances.
The period of work may be extended, subject to any extension of time
granted by the architect for delays that are not the fault of the main contractor under
the contract. When the contractor applies for an extension of time, it is often the case
that the architect will take some time to review before making a decision or withhold
the decision until the delay becomes apparent. In the absence of the instruction from
the architect, the contractor cannot recover the cost of acceleration of the work to
meet the completion date.
Therefore, contractors may take the risk of incurring liquidated damages for
the delay rather than spend extra money on acceleration. It should also be noted that
under no circumstances will the contractor be entitled to receive financial
compensation from the employer for the delay itself , as time can be extended
without increasing the overall cost of the contractor. The only entitlement for
monetary compensation from the employer is for the direct loss and /or expense
suffered by the main contractor as a direct consequence of the cause.3
According to Entrusty Group4, the evaluation to derive at the Extension of
time entitlement (EOT) can indeed be a complex subject especially when there is
more than one delaying events. Invariably, an evaluation of EOT will be made based
2
Lim Chong Fong , “The Malaysian PWD Form Of Construction Contract”, (Sweet & Maxwell Asia,
2004), pp.92
3
Teresa Cheng, Evia Wong, Gary Soo, “Construction Law And Practice In Hong Kong”, (Sweet &
Maxwell Asia, 2004),pp.344
4
Enstrusty Group,“ Is The Contractor Still Entitle To Extension Of Time Where Is Concurrent
Delay?”, First Quarter, (Master Builders Journal, 2006), pp.74-75
3
on programmes submitted by the contractor (Kevin, 2005)5. Besides the programmes,
the contractor is advised to provide relevant information related to delay such
variations and architect’s instruction for references, towards consideration for EOT
(Lim, 1998).6 Teresa Cheng 7 views that being fair and reasonable is the measure of
the extension of time to be granted to the contractor in relation to the causes(s) so
submitted.
1.2
Problem Statement
In construction contract, time may be stated either by reference to specified
date or by reference to a construction period.8 This practice has important
repercussions for parties to the contract, as a failure to complete by the date
stipulated may expose the contractor to claim for damages. Alternatively, where a
liquidated damage clause is inserted, delay will make the contractor liable for certain
liquidated amounts usually calculated at a daily or weekly rate in the contract itself.
It is important to all parties that the project be finalised by a specified date,
the standard forms of contract now provide details on the issues of delay in
completion and liquidated damages. The contract usually provides that the contractor
can apply for extension of time due to certain matters but not the fault of the
contractor, that the project is being delayed. The general procedure, for example, in
clause 43 I.E.M Condition of Contract For Works Mainly Of Civil Engineering
Construction’, the contractor shall use constantly his endeavours to prevent delay and
shall do all that may reasonably be required to the satisfaction of the Engineer to
5
Kevin,R.,“Analysing Extension of Time: What The Courts Have To Says”, First Quarter,
(Masterbuilders Journal.1, 2005), pp.74 -75
6
Lim P.K.,“ Evaluation Of The Contractor’s Claim For Extension Of Time”, (PAM Continuing
Professional Development Course, 25April 1998), pp. 1-21
7
Teresa Cheng, Evia Wong, Gary Soo, “Construction Law And Practice In Hong Kong”, (Sweet &
Maxwell Asia, 2004), pp.350
8
Martin, R.L.,“ Introduction Time Within Contracts”, (Bullet-Proof EOTs Conference, Kuala
Lumpur, July 2004), pp. 1-21
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proceed the works. The certificate issued by the Engineer under this condition shall
be referred to as the “Certificate of Delay and Extension of Time”.
A grant of extension of time to the contractor will only be issued for the
period of time which is found to come within the extension of time entitlements. At
numerous stages through this process, disagreement can arise between the parties,
and the potential for financial liability to the contractor at the end of the day makes
the issue one on which parties are unhappy to compromise.
The issues can also become contentious because the decision as to whether or
not to grant extension of time is generally placed in the hands of the architect. A
contractor may be dissatisfied if there is a delay by the architect in dealing with his
application for an extension, or having dealt with the application, coming to a
decision which is unfavourable or not sufficiently favourable to the contractor.
The assessment of claims for extension of time is extremely complex. The
Superintending Officer or Contract Administrator acts as independent adjudicator,
and he must acts fairly, reasonably and impartially to both his employer and the
contractor.
The main issue lies in the actual definition of ‛fair and reasonable assessment’
in granting extension of time. A dispute arises between the employer and the
contractor when there is a reason to challenge the Contract Administrator’s or
Superintending Officer’s ‘fair and reasonable’ assessment of extension of time.
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1.3
Objective of the Study
The objective of the study is to identify how Superintending Officers or
Contract Administrators approach their duty to assess Extension of Time fairly and
reasonably.
1.4
Scope of the Study
The approach adopted in this research is based on case laws and case studies.
The projects that will be investigated in this research are the housing projects i.e.
Perumahan Warga Felda (PWF) at Felda Schemes. There are two on going projects
which are located in Keratong 3 and Muadzam, Pahang and there were three
completed projects located in Mempaga, Bukit Goh and Lepar Hilir. The studies are
to identify how the Superintending Officers approach their duty to assess extension
of time fairly and reasonably. The detail of the five case studies as follows:
Case Study 1
Cadangan
Pembangunan
Perumahan
yang
Mengandungi 160 Unit Rumah Kos Rendah Satu
Tingkat, 45 Unit Rumah Kos Sederhan Rendah satu
Tingkat Dan Satu Unit Pencawang Elektrik Di Felda
Mempaga 2, Mukim Sabai, Daerah Bentong, Pahang
Darul Makmur.
Case Study 2
Membina Dan Menyiapkan Rumah Kos Rendah Dan
Kos Sederhana Rendah Satu Tingkat, Kedai Satu
Tingkat Dan Kerja-Kerja Infrastruktur Yang Berkaitan
Di Felda Bukit Goh, Kuantan, Pahang Darul Makmur.
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Case Study 3
Cadangan Membina Dan Menyiapkan 192 Unit Rumah
Rumah Kos Rendah, 58 Unit Rumah Kos Sederhana
Rendah, 5 Unit Kedai, Bazaar, Pencawang Elektrik
Dan Kerja-Kerja Infrastruktur Yang Berkaitan Di
Felda Lepar Hilir Saujana, Kuantan, Pahang Darul
Makmur
Case Study 4
Membina Dan Menyiapkan Rumah Kos Rendah
Setingkat, Rumah Kos sederhana Rendah Setingkat,
Kedai Setingkat, Pencawang Elektrik Dan Kerja-Kerja
Infrastruktur Yang Berkaitan Di Felda Keratong 3,
Mukim Keratong, Daerah Rompin, Pahang Darul
Makmur
Case Study 5
Cadangan Membina Dan Menyiapkan 125 Unit Rumah
Kos Sederhana Di Atas Lot 2263-2268, 2173 di Bandar
Muadzam Shah, Mukim Bebar, Daerah Rompin,
Pahang Darul Makmur
1.5
Research Methodology
In order to achieve the objectives of this study, a systematic process of
conducting this study had been organized. Basically, this study process comprised
five major stages, which involved identifying the study issue, literature review, data
collection, data analysis, conclusion and suggestions.
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1.5.1
Stage 1 : Identifying The Research Issue
The study issue arises from intensive reading of books, journals and articles
which can be attained from the UTM library, Building Construction Information
Centre (BCIC) and Resource Centre of Alam Bina (RC).Based on the study issue, the
objective of the study has been identified. In addition to that, this research is
executed to review the relevant court decisions with the intention of identifying how
Superintending Officers or Contract Administrators approach their duty to assess
Extension of Time fairly and reasonably.
1.5.2
Stage 2 : Literature Review
Collection of various documentation and literature regarding the study field is
of most important in achieving the research objectives. Besides, secondary data is
collected from reading materials in printed form like books, journals, research paper,
magazines, reports, proceedings, seminar paper as well as information from the
internet. It is important to identify trends and developments over time in construction
industry, as well as the general state of knowledge concerning the subject area of
delay such as background, definition, type, procedures, relevant events and etc.
1.5.3
Stage 3: Data Collection
In this stage, after identifying all the background and relevant issues through
literature review, legal cases based on written opinions of courts, which are related to
the study issue, will be collected from different sources such as All England Law
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Reports, Malayan Law Journals, Singapore Law Report and etc. via UTM library
electronic database, namely Lexis-Nexis Legal Database. Data from the five case
studies had also been collected from Felda Engineering Services Sdn Bhd.
1.5.4
Stage 4: Research Analysis
Once the previous related court cases under Malayan Law Journal were
collected, reviewing and clarifying of all the facts of the cases will be conducted. The
data from the five cases also were also collected in housing projects procured by
Felda Engineering Services Sdn Bhd. The focus will be to identify how
Superintending Officers or Contract administrators approach their duty to assess
Extension of Time fairly and reasonably. After presenting the issues of each case
based on case studies, a thorough discussion and comparison will be done in order to
achieve the objectives of this study.
1.5.5
Stage 5 : Conclusion And Recommendation
In this stage, reviews on the whole process of the study will be made to
identify whether the study objective has been achieved. After presenting the study
findings, recommendations and limitations of the study and a topic for further
research emerge. Figure 1.1 shows a flowchart of the research methodology to
achieve the objectives of the study.
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RESEARCH ISSUE
The issue is that a dispute arises when there is an issue of determining whether the
Contract Administrator or Superintending Officer acts correctly regarding the ‘fair
reasonable’ assessment of extension of time
RESEARCH OBJECTIVE
To identify how Superintending Officers or Contract Administrators approach their
duty to assess Extension of Time fairly and reasonably.
ƒ
LITERATURE REVIEW
Construction delay, types of delay, causes of delay, extension of time,
purpose of granting EOT, The ground for EOT, relevant events, procedure for
claiming EOT, Timing of the notification, detailed particulars of EOT,
assessment of EOT, duties of engineer in granting EOT, fair and reasonable
EOT, the law cases relating fair and reasonable and the Protocol Of The
Society Of Construction Law
ƒ
RESEARCH METHOD
Data collection:
Legal cases in relation to the fair and reasonable in assessing
extension of time
-
Access to UTM library electronic database(Lexis-Nexis Legal
Database)
-
Collect cases from All England Law Report, Malayan Law
Journal, Singapore Law Report, Current Law Journal and etc
-
Data from case studies.
DISCUSSIONS
CONCLUSION & RECOMMENDATIONS
Figure 1.1: Research Methodology